The Strategic Effects of Parallel Trade～Market stealing and wage cutting～
AbstractWhy do producers often accept parallel trade in some markets such as automobiles, clothing, toys and consumer electronics? This paper identifies two new factors, viz., market stealing and union-wage cutting, which may make parallel trading beneficial to a manufacturer. Specifically, (i) under perfectly competitive labour markets in both the home and foreign countries, parallel trade may help a manufacturer to steal market shares from competitors, if it is more cost efficient or sells in more markets than competitors; and (ii) in a unionized labour market, parallel trade may help by lowering the unionized wage. These benefits of parallel trade disappear when such factors are removed.
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Bibliographic InfoPaper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2010-09.
Length: 23 pages
Date of creation: Mar 2010
Date of revision:
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Firm-asymmetry; Labour Union; Parallel import;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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